Problema Solution
Compute Miguel's estimated tax payment for the fourth quarter. He is self-employed and he expects to earn $21,840 this year. His estimated income tax rate is 21%. For self-employed persons, social security tax is 12.4% of wages up to $106,800, and Medicare tax is 2.9% of all wages.
Answer provided by our tutors
we add up the taxes:
0.21 + 0.124 + 0.029 = 0.363
Since it's a quarterly return,
(1/4)(0.363 * 21840) = $1,981.98 is Miguel's estimated tax payment for the fourth quarter.